Here, Investment Week talks to Sara Moreno, portfolio manager of the PGIM Jennison Emerging Markets Equity Fund, Jennison Associates, a PGIM business.
Can you give a brief overview of the team running the PGIM Jennison Emerging Markets Equity Fund and the resources available?
The Emerging Markets Equity strategy is managed by three portfolio managers: Albert Kwok, Mark Baribeau and myself.
Mark Baribeau has overall responsibility for Jennison’s global, international and emerging market equity strategies, while Albert and I handle the day to day management of the EM strategy.
Albert focuses on stocks in emerging Asia. He grew up in Hong Kong and Singapore and is fluent in Mandarin and Cantonese.
I focus on stocks in Latin America, emerging eastern Europe, the Middle East, Africa and emerging market healthcare companies.
I grew up in Ecuador, Nigeria, and Trinidad and Tobago. I am fluent in Spanish and proficient in French and Italian.
The team also leverages the insights and experience of Jennison’s global research analysts, many of whom are sector specialists and conduct research for the firm’s other growth equity strategies.
What is key to your investment process on the fund?
We believe that identifying and capturing emerging markets opportunities requires a concentrated, highly active, benchmark-agnostic approach to investing.
We have the flexibility to construct the portfolio across market capitalisations and are not constrained by index, sector, country, or region.
We believe our seasoned and dedicated emerging markets team coupled with our experienced global growth team enables us to anticipate trends in the emerging markets and accurately assess individual company fundamentals.
Our focus is on unique companies with sustainable competitive advantages and a long duration growth profile.
The key characteristics we look for include:
- Disruptive technologies – when we find them we like to be early and move meaningfully
- New product cycles – found mostly in health care and consumer sectors
- Large addressable market – EM is rich in these opportunities as countries/regions across EM have expanding middle classes and rising incomes.
We also carefully analyse the ability of management to execute on their strategy.
How did the team negotiate the market fallout from Covid-19 and what is the longer-term impact for the strategy?
Driven by our long-term investment philosophy, the PGIM Jennison Emerging Markets Equity Fund was well-positioned to navigate the market fallout from Covid-19.
This was mostly due to stock selection and positioning in important secular trends including direct to consumer (DTC) business models built on flexibility and omni-channel distribution including e-commerce and technology applications that facilitate sales, improve convenience, or enhance service delivery, like digital payments.
These trends accelerated during the period of economic turmoil and social distancing brought on by Covid.
The distinct value and utility of these types of companies has provided stronger upside growth in rising markets and more resilient performance tempering the downside during the sharp downturn.
We believe many of the winners of the past few years offer differentiated and disruptive business models that became even more compelling during Covid.
E-commerce companies, healthcare innovators, digital payments systems, cloud computing providers, are among the companies positioned for continued growth.
As companies and individuals in developing countries gain an enhanced appreciation of their distinct value and utility, demand for and adoption of their services and products are set to accelerate, leading to greater penetration and market share gains.
Can you highlight a couple of interesting investment opportunities for the fund going forwards. How are you gaining exposure?
In general, we find companies creating a disruptive technology or service, introducing a new product to the market, or expanding into underpenetrated markets as especially attractive.
The acceleration in e-commerce penetration was one of the biggest global trends of 2020 and we believe this will continue for years to come.
However, it will be critical to distinguish where demand was pulled forward versus where demand will manifest next.
Emerging markets such as Latin America and Southeast Asia will most likely see the biggest explosion in growth rates, due to low penetration rates coupled with very large middle class populations.
E-commerce facilitators such as digital payment platforms with offline payment capabilities, are also beneficiaries of the growth in ecommerce, as these regions tend to be much less reliant on credit cards.
Additionally, the Chinese healthcare sector offers compelling growth opportunities with strong long-term catalysts, especially in the pharmaceutical and biotech arenas.
As the world’s most populous nation with the second-largest economy, China offers long-term growth opportunities in its healthcare sector, driven by several dynamic trends: an aging population, an increasing prevalence of chronic diseases, growing wealth to afford medical care, regulatory reform, and an influx of capital.